Option pricing with transaction costs using a Markov chain approximation

DOI10.1016/S0165-1889(03)00059-9zbMATH Open1179.91244MaRDI QIDQ951502FDOQ951502

Authors: Michael Monoyios 

Publication date: 24 October 2008

Published in: Journal of Economic Dynamics and Control (Search for Journal in Brave)

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zbMATH Keywords

option pricingtransaction costssingular stochastic controlutility maximisationMarkov chain approximation

Mathematics Subject Classification ID

Monte Carlo methods (65C05) Derivative securities (option pricing, hedging, etc.) (91G20) Numerical methods (including Monte Carlo methods) (91G60) Financial applications of other theories (91G80)

Cites Work

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• Optimal investment and consumption with transaction costs
• Efficient hedging: cost versus shortfall risk
• There is no nontrivial hedging portfolio for option pricing with transaction costs
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• A simplified treatment of the theory of optimal regulation of Brownian motion
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Cited In (27)

• OPTIMAL INVESTMENT AND CONTINGENT CLAIM VALUATION WITH EXPONENTIAL DISUTILITY UNDER PROPORTIONAL TRANSACTION COSTS
• Correlated continuous time random walk and option pricing
• Performance of utility-based strategies for hedging basis risk
• Robust generalized Merton-type financial portfolio models with generalized utility
• European option pricing with market frictions, regime switches and model uncertainty
• European option pricing with transaction costs in Lévy jump environment
• Utility-indifference pricing of European options with proportional transaction costs
• Penalty approach to the HJB equation arising in European stock option pricing with proportional transaction costs
• Dynamic portfolio selection with fixed and/or proportional transaction costs using non-singular stochastic optimal control theory
• Pricing European options with proportional transaction costs and stochastic volatility using a penalty approach and a finite volume scheme
• An improved Markov chain approximation methodology: derivatives pricing and model calibration
• Options under proportional transaction costs: An algorithmic approach to pricing and hedging
• Pricing a contingent claim liability with transaction costs using asymptotic analysis for optimal investment
• Optimal exercise of American puts with transaction costs under utility maximization
• A computational method to price with transaction costs under the nonlinear Black-Scholes model
• Dynamic portfolio optimization with transaction costs and state-dependent drift
• European option pricing and hedging with both fixed and proportional transaction costs
• On option pricing in binomial market with transaction costs
• European option pricing with transaction costs.
• On barrier option pricing in binomial market with transaction costs
• Time-consistent actuarial valuations
• Utility based pricing and hedging of jump diffusion processes with a view to applications
• OPTION PRICING FOR INCOMPLETE MARKETS VIA STOCHASTIC OPTIMIZATION: TRANSACTION COSTS, ADAPTIVE CONTROL AND FORECAST
• Computation of reservation prices of options with proportional transaction costs
• Approximate solution of nonlinear Black-Scholes equation via a fully discretized fourth-order method
• Title not available (Why is that?)
• Option hedging theory under transaction costs

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